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Aviation: Can emerging concessionaires inject $50bn in 30 years?

The Nigerian aviation industry seems to be at a cross road considering the revelation by industry experts that the sector is in need of $50bn in the next 30 years.

Discussants at the recent Colloquium 2017, Vision 2050 for Aviation Industry agreed that for the aviation industry to grow in Nigeria and be in tandem with what is obtained in other parts of the world and at the same time, become a hub in West and Central Africa, the industry needs an injection of $50 billion within three decades.

Whereas it is not feasible for such funding to come from the federal government, there are fears that based on experiences of previous concessioning deals and their performances in Nigeria, not up to that amount would be injected by concessionaires’.

From studies, concessionaires in several sectors in the country are known for either asset stripping or desire to recoup non-existing investments even before putting down their money.

According to previous concessions, winners are known for first of all providing evidences or documents of capacity to do the job, but they shift emphasis from investments to money making immediately the enterprise is transferred to them and start making money as soon as possible.

The Nigerian experiences in power generation and distribution, Ajaokuta Steel, Aluminum Smelting company, and so many others are testimonies of failures except Lagos International trade fair complex where the concessionaire, Aulic Nigeria Limited has turned the complex to world class commercial centre.

For example, part of the reasons why the Lagos State government under former Governor and current Minister of Power, Works and Housing, Mr. Babatunde Fashola bought over the highly celebrated Lekki-Epe Expressway concessioning from Lekki Concession Company (LCC) and now domiciled the investment in the State Ministry of Transportation was because government discovered that the concessionaire was instead of investing its fund which it claimed it had on the road, it only did about 11kms and built tollgate and started using the money it makes from the toll to do the remaining 39kms.

The original plan was to do the 49kms and then, start tolling on two points, but the company did only 11kms and started tolling.

But the government under Fashola has to shut it down when it did additional 10kms and wanted to toll. From that point, government decided to buyover the investment and paid off the investors.

Inside sources told Business Hilights that in less than two years, Lagos State government recouped the whole fund it used to buyover the concession.

The smart move was possible in Lagos State, but may not be at the federal level after all.

This links up to the fear on whether prospective investors in the emerging concessioning of leading airports can inject the needed funding to drive the targeted hub status.

Explaining the need for the injection at the Colloquium 2017, industry expert and Chief Executive Officer of RTC Advisory, Opeyemi Agbaje said the Nigerian aviation industry attracted $4 billion foreign direct investment (FDI) in 2016, noting that in 2010, the sector attracted $6 billion, $7.1billion in 2012; $5.6 billion in 2013; $4.6 billion 2014 and $8 billion in 2015.

In his paper titled: ‘Vision 2050: How to fast track Nigeria’s Aviation,’ Agbaje remarked that by attracting these huge funds during the said periods indicated that the country did not encourage private participation and stressed that the industry needs about $50 billion to grow into a competitive industry and utilise the huge market provided by the country’s growing population.

According to him, the economy first of all “Requires a stable macroeconomic environment; forward-looking and proactive policy; a clear and compelling vision for the industry shared by all stakeholders including government and the private sector; and regulation that seeks to foster industry transformation”.